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Stock market volatility and shaky economies worldwide may impact whether some companies go public, but the energy sector’s unique properties leave it open to penetrating the capital market, analysts say.

During the past two weeks, three Houston energy companies — Dynamic Offshore Resources Inc., Forum Energy Technologies Inc. and Sanchez Energy Corp. — filed initial public offerings. At the same time these offerings were filed, initial public offerings from other sectors were postponed after stock markets took a hit in August due to Standard & Poor’s downgrade of the U.S. credit rating and financial instability in Europe.

“Investors want certainty when they monetize,” said Trey Hunt, Weaver accounting firm’s partner-in-charge over its oil and gas practice in the Houston office. “In the last few weeks, you saw energy prices stabilize. The experts say anything above $80 (per barrel) is economical for most companies. People can make money at those levels.”

Rob Reedy, managing partner at Porter Hedges LLP in Houston, represented underwriters Johnson Rice & Co. in the Sanchez Energy IPO. He said pioneering advances in technology — and the associated costs — also have moved companies to consider going public.

“The technology has made a tremendous revolution in the business, but it’s also expensive. You need capital to get these projects done,” he said.

When energy companies need to raise capital, the markets are typically receptive, Reedy said. Investments in commodities — such as oil and gas — are viewed as a good place to put money.

David Buck, Andrew Kurth LLP partner and corporate and securities co-chairman, said investors have been attracted to many publicly traded energy companies that operate as partnerships, which aren’t taxed as regular corporations at the standard 35 percent rate.

Rather, the partners themselves are taxed while receiving a tax shield on distributions received through allocable depreciation, amortization and other expenses. The distributions reduce the tax basis of the investments in the partnership’s units. As a result, the tax is only deferred for partners, who have taxable income if they sell the units at a gain.

Partnerships in the energy sector currently are generating distributions of 5 percent to 6 percent, Buck said.

“It can be a game-changing experience for the company, but it requires a lot of additional analysis to confirm that being public is the optimal path for the company and its constituents,” Buck said.

The cost of filing an IPO is a factor for any company to consider, he said. Additional reporting requirements, accounting and liability insurance to cover a board of directors and officers can add up to about $2 million for an exchange listing.

Joe Dunleavy, capital markets and accounting advisory energy sector leader at PricewaterhouseCooper in Houston, said he is cautiously optimistic that energy IPOs will continue to trend up, but probably not in a steep way.

“Energy is an industry where participants are not strangers to volatility,” he said. “They take a long-term perspective on their business models. They have plenty of reserves, and I think it’s a sector that’s more able to weather these volatile times.”

Sanchez Energy Corp.

IPO: $150 million REVENUE: $11 million in sales, year end June 30BUSINESS: Independent oil and gas E&PFOUNDED: 1972NYSE: SEN

FORUM ENERGY TECHNOLOGIES INC.

IPO: $300 millionREVENUE: $859 million in sales, year end June 30business: Energy technology and service equipmentFOUNDED: 2005NYSE: FET

DYNAMIC OFFSHORE RESOURCES INC.

IPO: $400 millionREVENUE: $387 million in sales, year end June 30BUSINESS: Oil and gas E&PFOUNDED: 2008 NYSE: DORSource: RenaissanceCapital.com

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